EDUCATION SPURS ECONOMIC GROWTH

August 19, 2004

Possessing or attracting a large population of skilled, educated workers is the key to long-term economic success, according to a new paper from the National Bureau of Economic Research. Analyzing Boston's economic revival, the authors argue that a good skill base allows cities to reinvent themselves after negative economic shocks.

Today, Detroit continues its economic decline, while Boston is enjoying economic success and some population growth.

According to the paper, the different levels of education explain the different results. A 2000 survey found that half of Bostonians between 25 and 34 had college degrees, while Detroit did not have near that many. This allowed Boston to transform itself from a "dying manufacturing town" to a "vibrant information city." The authors observed that as the number of college graduates per capita doubles, the expected growth rate over the decade rises by roughly 4 percent.

The paper acknowledges that skills are not everything. Most notably, a warm, dry climate and an influx of immigrants can also be key ingredients for growth.

Source: Matthew Davis, "Education Level Drives City Growth," NBER Digest, June 2004; based upon: Edward Glaeser and Albert Saiz, "The Rise of the Skilled City," National Bureau of Economic Research, Working Paper No. 10191, December 2003.